Falafel Stand

Industry Sub-Division

Falafel stands are included in the fast food category, and mainly answer to the basic need in simple food.Falafel stands in Israel may be grouped according to three types:

{C}Ø {C}Stands selling falafel and soft drinks only:This type is the most common among existing stands. In the past, most stands were of this type.These stands are located on side streets in large cities, provinces, and neighborhoods.

{C}Ø {C}Stands selling falafel, soft drinks, and other types of food:This type of falafel stand has become increasingly abundant in recent years, and is typical for most cities.The most common combination in this type of business is falafel and shawarma. In addition, many falafel stands also sell hummus and beans.

{C}Ø {C}Falafel stands located near restaurants, buffets etc. - this type of falafel stand is typically located in shopping centers, main streets, and walkways.At shopping centers and main streets, most falafel stands are conjoined with restaurants.

Market Characteristics

{C}Ø Low entrance threshold- the industry does not require much professional knowledge, and raw profitability is very high.

{C}Ø High closure rates- due to low entrance threshold, the industry is characterized by high opening and closure rates.One of the reasons for this is the industry’s reputation for “easy money”.

Falafel prices in Israel currently range between 8-12 NIS per serving (including VAT).These prices are reflected nationally, and there is no obvious disparity among cities.

Customers:Defining the Target Market and Its Size, Market Segmenting

Potential industry clientele includes people seeking food, segmented according to a number of factors:

{C}Ø The need for quick, simple, and cheap food.

{C}Ø Age- a large percentage of customers are relatively young- 12-30.

{C}Ø Geographical vicinity- most falafel stand customers are located in its geographical vicinity.

{C}Ø There are some falafel stands so reputable that some customers are willing to travel to them especially.

{C}Ø The industry is characterized by customer allegiance to good stands.

Competition

The industry is highly competitive, and competition stems mainly from 2 sources:

{C}Ø Various falafel stands located in the area, and farther, reputable falafel stands.

{C}Ø Other types of fast food offered in the area.

Marketing Resources

Advertising varies and mainly includes distribution of flyers, magnets displaying the stand’s logo, and occasionally even local print advertising.Most marketing efforts are reflected in the stand’s location, Cleanliness, quality, freshness of products, and customer service.In addition, word of mouth reputation and standing are highly effective tools.

Factors Affecting Success:

A number of parameters may affect the stand's success.Among them:

{C}Ø Quality and flavor of food.A falafel stand accumulates a reputation and customer allegiance with time. This is directly associated to falafel's quality.There are some well-established stands in Israel that are characterized by long lines of customers willing to swear that this is the best falafel in the country.

{C}Ø The stand’s location is an important parameter to its success. Before establishing a falafel stand, one should inquire as to the potential clientele in the area as well as relevant competition.

{C}Ø Customer service- quality of service is a central factor and key to the restaurant’s success.A tidy, sanitary location that offers a comfortable dining area improves service.

{C}Ø The fast food industry’s competitiveness and dynamics are an additional issue, as they constitute alternatives.A decrease in falafel prices may force other stands in the area to lower prices and thus affect a falafel stand’s profitability.

Human Resources

Establishing a falafel stand requires recruitment and employment of appropriate human resources. There are usually 2-4 workers at a falafel stand, including counter workers and general workers.

Financing:

Required Investment

The following constitutes main parameters of the investment plan for a falafel stand:

A falafel stand is permitted to prepare and fry falafel, in addition to preparation of side dishes made of uncooked vegetables for consumption at the stand's location.

It is prohibited to sell, prepare, or be in possession of food containing meat, including fish, meat, and poultry.

Self-service sales are not permitted at a falafel stand.

Industry Revenue and Profitability

Material percentage in the falafel industry comprises 23-27% of revenue.

Yearly revenue per worker for a falafel stand located on main roads in 2003 in NIS thousands, including VAT:

Reputable

falafel stands

494-556

Falafel only stands

or mixed stands

232-255

Falafel Only Stands

136-185

Revenue is produced only by selling falafel.

A mixed stand, also sells shawarma or sandwiches in addition to falafel.

Profit percentage from beverage sales at a falafel stand is 57%.

When calculating revenue data, inactivity due to holidays were taken into account.

Risk level:

The food and restaurant industry is a high-risk industry- there are many new business, but the number of failed or closed businesses is high as well.The highest investment required is in appropriating and remodeling the location, an investment which will be completely lost in case of failure.A partial return on the supply investment may be possible, as the market is abundant with used supplies.

Licenses and certifications:

In order to open a falafel stand, a business license is required from local authorities, and the Ministry of Health, after qualifying for such a permit.

Tips:

Before deciding to establish a new business, the location should be carefully chosen.Keep in mind that competitors (of any type) located in the area will result in more difficulties.

Regular expenses should be looked into.

It is recommended to consult with your local Business Development Center regarding business establishment and operations